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The Fraser Institute: Six Canadian Provinces Could Be Spending More Than 50 Per Cent of Revenues on Health Care by 2035

TORONTO, ONTARIO--(Marketwire - Dec. 3, 2007) - Provincial health care spending continues to grow at an unsustainable rate and will consume more than half of all revenues in six of 10 Canadian provinces by 2035 unless changes are made, says a new study released today by independent research organization The Fraser Institute.

Nova Scotia and Newfoundland & Labrador are the most urgent cases, where health care spending could consume half of all revenues as early as 2017 and could hit 60 per cent of all revenues by 2022 in Newfoundland & Labrador and 2026 in Nova Scotia.

New Brunswick is on track for spending 50 per cent of its revenues on health care within 17 years, Prince Edward Island within 24 years, British Columbia will hit 50 per cent in 27 years with Saskatchewan following in 28 years.

Of the remaining provinces where health care spending is increasing faster than revenues, Ontario and Manitoba are projected to reach 50 per cent in 43 and 47 years respectively while Quebec won't reach it for another 49 years. Alberta is the only province where total revenues have grown faster than health care spending during the trend period.

"If health care spending continues at current rates without changes to our health care system, provinces are going to hit a wall where they have to choose between reducing other services such as education, or imposing further restrictions and rationing of health care," said Brett Skinner, the Institute's Director of Health, Pharmaceutical and Insurance Policy Research and lead author of the study.

"If Canadians refuse to embrace change or other policy alternatives, they can expect to continue paying more and getting less when it comes to health care."

Paying More, Getting Less 2007: Measuring the Sustainability of Public Health Insurance in Canada, is The Fraser Institute's fourth annual report on the financial sustainability of provincial public health insurance. The peer-reviewed study uses Statistics Canada data from the past 10 years to project growth trends in government spending on health care versus total revenue.

"This year's report is based on a longer 10-year analysis rather than the five-year analysis used in the past. The use of 10 years' worth of data confirms the ongoing unsustainability of provincial health care spending and should convince policymakers that this is a critical issue that needs to be addressed," Skinner said.

The report notes several factors influencing provincial revenues that could change in the coming years, thereby affecting the percentage of revenues eaten up by health care spending.

Provinces, such as Alberta, British Columbia, Saskatchewan, and Newfoundland & Labrador have been affected by inflation in energy prices over the past five years. The study notes that it is uncertain if the economic conditions driving increases in energy prices will persist in the future, making it unclear whether recent growth rates for GDP and revenue will continue.

Some provinces are heavily reliant on federal transfers for a large part of their revenue. The growth rates for government health spending in Manitoba, New Brunswick, Newfoundland & Labrador, Nova Scotia, and Prince Edward Island are subsidized by federal transfers to a much higher degree than rates in other provinces.

The report concludes that public health insurance, as it is currently structured in Canada, tends to produce rates of growth in health spending that are not financially sustainable through public means alone. This is occurring while governments are restricting and reducing the scope of benefits covered under publicly funded health insurance. As an alternative to the current "pay more, get less" approach to health policy, Skinner makes several recommendations:

- Encourage the efficient use of health care by requiring patients to make co-payments for any publicly funded medical goods and services they use;

- Relieve cost pressures facing the public health-insurance system by legalizing the right of patients to pay privately (private insurance or out of pocket) for all types of medical goods and services, including hospitals and physician services, as is currently allowed for access to medicines;

- Allow health providers to receive reimbursement for their services from any insurer whether government or private;

- Shift the burden of medical price inflation onto the private sector by allowing providers to charge patients fees additional to the government health-insurance reimbursement level;

- Create incentives for cost and quality improvements by permitting both for-profit and non-profit health providers to compete for the delivery of publicly insured health services.

"Medicare is a government-run health insurance monopoly. Its design is flawed because it is influenced by politics not economics. It is not accountable to patients and is barely accountable to taxpayers," Skinner said.

"If we want to ensure we have a health care system that's affordable and sustainable, Canadians need to start looking at private sector health care policy alternatives."

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.